An option strategy which is established by taking a short position in an underlying not currently owned by the position holder. An investor could write or sell an uncovered call if he is neutral or bearish on the underlying, i.e., when the investor expects the price of the underlying is going to stay stagnant or fall. The maximum gain from a short call is only limited to the premium received by the seller. However, potential losses would be unlimited when the underlying follows an upward path. In this case, the investor would have to buy the underlying dear and sell it cheap.
The uncovered call is also referred to as a naked call.
